Jeffrey D. Daggett, a Stockbroker with Wells Fargo Advisors, received a four-month suspension from association with any Financial Industry Regulatory Authority (FINRA) member firm in any capacity, as well as a $20,000.00 fine after consenting to findings that he recommended unsuitable transactions in exchange trade notes, as well as leveraged and inverse leveraged exchange traded funds in customer accounts. Letter of Acceptance, Waiver, and Consent, No. 2012035383801.
According to the AWC, from March, 2010 – September, 2011, Daggett had recommended as well as traded transactions in the exchange traded notes as well as the non-traditional exchange traded funds that were held by a firm client named JD. The AWC reported that Daggett concentrated two of client JD’s accounts in an exchange traded note which FINRA deemed speculative and volatile, as well as a triple leveraged exchange traded fund and inverse triple leveraged exchange traded fund. FINRA found Daggett’s recommendations to the client were not consistent with the client’s investment objectives of moderate growth and income.
The AWC further stated that despite the prospectus warnings for exchange traded notes, investors still held funds in them for investment periods of one month to two years. The AWC further stated that Daggett had recommended the exchange traded note and non traditional exchange traded fund without any reasonable grounds to believe that such securities being recommended were suitable for JD, considering JD’s financial status, investment needs and objectives. The AWC stated that JD suffered losses of roughly $88,099.75 as a consequence of the investments in the non-traditional leveraged exchange traded fund and the exchange traded notes. FINRA found Daggett’s conduct of making the unsuitable recommendations to be a violation of FINRA Rule 2010 as well as NASD Conduct Rule 2310 and IM-2310-2.
Leveraged, inverse, and inverse-leveraged exchange traded funds are designed to return a multiple of an underlying index or benchmark, inverse of that benchmark, or both, over only the course of one trading session. Consequently, the performance of these non-traditional exchange traded funds can differ significantly from the performance of their underlying index, particularly when held longer than single trading sessions. According to FINRA, inverse and leveraged ETFs that reset daily are typically not suitable for retail investors planning to hold them for longer than one trading session, especially in volatile markets.
Public disclosure records via FINRA’s BrokerCheck reveal that Daggett has been subject to at least seven disclosure incidents. On October 27, 2008, Daggett settled a customer dispute for $25,864.61 after a customer alleged that the investment advisor failed to timely follow her instructions to sell her annuities in a free look period. On November 20, 2008, Daggett settled a claim with a client for $12,739.27 after a client alleged that the financial advisor misrepresented the terms of an annuity investment.
On August 11, 2012, Daggett settled a customer dispute for $25,000.00 after a client alleged that the asset allocation of investments in his portfolio was not appropriate. On July 15, 2013, Daggett settled a customer dispute for $10,000.00 after a client stated that closed end funds that were purchased were too risky.
Securities brokerage firms have a duty to supervise their brokers and the sales practices of their brokers, and to review customer statements for, among other things, evidence of suitability, unauthorized trading, or excessive activity.
Guiliano Law Group
If you have been the victim of securities fraud and you have a complaint, you should consult with an attorney. The practice of Nicholas J. Guiliano, Esquire, and The Guiliano Law Group, P.C., is limited to the representation of investors in claims for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.
